Fiscal cliff deal approved in the Senate, goes to House of Representatives

Vice President Joe Biden speaks following a Senate Democratic caucus meeting about the fiscal cliff on Capitol Hill, Dec. 31, 2012 in Washington.

(CBS NEWS) -- The ball in Times Square has dropped, 2013 is here and, technically,
so is the "fiscal cliff", as Congress has yet to officially pass a plan
to avert the scheduled spending cuts and tax hikes.

But before panic
sets in, although lawmakers failed to meet the midnight deadline, a deal
is in place and the first step to making it official -- Senate passage
-- is in the books.

The Senate voted 89-8 in favor of the bill in the wee hours of New
Year's Day, sending the deal along to the House, which must pass the
measure in order for the "cliff" to be averted.

The House is
expected to vote on the deal as early as today, but given tepid signals
from House Republican leaders, the vote there will be an interesting one
to watch.

"The House will honor its commitment to consider the
Senate agreement if it is passed," the leaders, which included House
Speaker John Boehner, said in a statement after the agreement was
announced last night. "Decisions about whether the House will seek to
accept or promptly amend the measure will not be made until House
members -- and the American people -- have been able to review the
legislation."

President Obama released a written statement early Tuesday morning, praising the Senate and urging the House to follow suit.

"While
neither Democrats nor Republicans got everything they wanted, this
agreement is the right thing to do for our country and the House should
pass it without delay," said Mr. Obama.

Vice President Joe Biden, who traveled to Capitol Hill to brief
Senate Democrats on the details of the deal, briefly spoke to reporters,
warning that there's no predicting what the House will do.

"Being
in the Senate as long as I have, there's two things you shouldn't do:
you shouldn't predict how the Senate will vote - you won't make a lot of
money - and number two, you surely shouldn't predict how the House is
going to vote. I feel very, very good. I think we'll have a good vote
tonight, but Happy New Year," said Biden.

As the deal was not
signed into law before midnight, the country has technically gone over
the "cliff". However, unless the deal fails to clear Congress, any
detrimental economic impact will be avoided, as language will likely be
added to the final legislation that would make the agreement retroactive
to midnight Jan. 1.

Here are the known details of the deal:

Tax rates: Current tax rates will be extended for all wage earners making below $400,000 and couples making below $450,000.

This
was a key concession for both Republicans and Democrats. Democrats
wanted the threshold for tax increases to rest at $250,000 and
Republicans didn't want marginal tax rates to increase for anyone.

The
estate tax: It was set to increase from rom 35 percent to 55 percent in
2013. Instead, the compromise sets the new rate at 40 percent with the
first $5 million worth of property exempt from being taxed.

Alternative Minimum Tax: A permanent fix to the tax that would hit middle class families

"Doc Fix": Doctors will be shielded from a massive reimbursement gap for treating Medicare patients.

Unemployment benefits: Unemployed workers will receive their benefits which expired over the weekend.

Renewable energy tax credit: The tax credit for renewable energy companies will be extended for another year.

While
the extension of unemployment benefits and the Medicare "doc fix" cost
money, and revenue will be lost due to a fix in the Alternative Minimum
Tax, the package will still increase the federal government's receipts.
The total package will add $600 billion to federal coffers.

Also
included in the deal is an unrelated provision but one that would have
impacted Americans' pocketbooks. According to Senate Agriculture
Committee chairman Debbie Stabenow, D-Mich., negotiators agreed to a
nine-month partial extension of the farm bill. The legislation, which
dictates subsidies to crop and commodity growers, was also set to expire
at midnight, and the impact was likely to cause milk prices to rise to
$7 or $8 a gallon.

What has been left out of the "cliff" deal:

The
sequester: The $110 billion worth of automatic spending cuts under the
sequester will be delayed for two months. The cost of continuing current
federal spending levels will be offset by revenue increases and some
spending cuts. In two months, the delayed spending cuts will kick in
half will come from defense and half from non-defense accounts.

The
two-month window is to allow Congress and the White House to come up
with a larger deal on spending cuts, leading to another (though smaller)
"fiscal cliff." Democrats see this deal as a victory because
Republicans had objected to using any new tax revenue to offset the loss
of sequester spending cuts, reports Garrett.

Payroll
tax extension: payroll taxes will increase by 2 percent for all wage
earners. This was passed and extended by Congress to give taxpayers
additional relief during the slow economic recovery.

Debt limit: The country reached its debt ceiling today, according to a latest estimate by
Treasury Secretary Timothy Geithner, but because of maneuvering and
shuffling the nation's balance books, bills can be paid for another two
months. Another debt ceiling fight is poised to happen around the same
time the new sequester is expected to kick in.

Emphasizing
the importance of deficit reduction to his fellow Republicans, Senate
Minority Leader Mitch McConnell, R-Ky., the GOP's lead negotiator, urged
his colleagues not to hold up a deal because budget cuts have not been
addressed. Earlier in the day he called the tax portion of the "fiscal
cliff" the most important component and said, "Let's take what's been
agreed to and get moving."

"Action on the sequester is something we can continue to work on," McConnell added.

The
agreement, formulated mostly between McConnell and Vice President Joe
Biden, was a last-ditch effort after negotiations broke down numerous
times.

House
Speaker John Boehner, R-Ohio, who for weeks negotiated directly with
President Obama, froze himself out of the arena just before Christmas
with his ill-fated attempt at a "Plan B" that landed with a thud among a
few dozen of his own members. Then, after Mr. Obama flew back from his
Hawaiian vacation, presumably unhappy about leaving paradise for the
cold and deserted nation's capital, he summoned congressional leaders to
the White House and dumped the onus of reaching a deal on the laps of
Reid and McConnell.

Alas, Sunday, McConnell found himself
throwing his hands up in exasperation after Reid slow-walked a promised
counter-proposal and he picked up the phone to the White House to find,
as he put it, "a dancing partner" in Vice President Joe Biden.

The
$1.2 trillion of federal spending cuts over ten years combined with a
massive tax increases for all wage earners was the result of Congress
kicking the can down the road. In previous last-minute deals sealed by
the two current negotiators - McConnell and Biden - Congress extended
the Bush-era tax rates in 2010 for an additional two years and in 2011
agreed to the automatic, non-targeted federal spending cuts worth $1.2
trillion over ten years in exchange for an increase to the debt ceiling.
Those actions combined with other extensions to tax credits,
unemployment benefits and Medicare doctor payments, the "fiscal cliff"
was born.

Earlier Monday, President Obama took
to the stage with middle-class taxpayers urging Congress to seal the
deal. Even though he was unable to reach a deal with Boehner and his
vice president stepped in to finalize the last-minute negotiations, he
made no qualms about digging in at Congress, raising the ire of some
Republicans. Mr. Obama quipped the "one thing" he can count on with
Congress is "if there is even one second left before you have to do what
you're supposed to do, they will use that last second."